Why You Should Still Carry Insurance After Your Mortgage Is Paid Off

Posted on: 22 May 2019

Homeowner's insurance is required of every person that takes out a mortgage loan to buy a property. The lender wants to be assured that if anything happens to the home, the lender is not left dangling on the hook for a mortgage for a property that the borrower cannot use as a dwelling. Additionally, if something were to happen, the lender does not want a situation where the borrower refuses to pay or defaults on the loan because the borrower no longer has a home. However, when a mortgage is paid in full, borrowers have no obligation to anyone but themselves to continue carrying coverage on their homes. This may sound quite tempting to do, since it would save you a couple thousand dollars a year, but really, you should always carry homeowners insurance, even after you have paid off your mortgage. Here is why. 

Get Back Every Penny

If your house was blown away in a tornado or goes up in flames tomorrow, you would lose every penny you ever spent on your home. Without insurance, you would never get any of that money back, and you would have to rebuild your own home on your property with your own money, or borrow money all over again to rebuild. Since you just paid off the mortgage, you probably would not enjoy borrowing another one or two hundred thousand dollars to rebuild. With insurance, your investment is completely restored with just a few deductibles to pay. The insurance company rebuilds the home you lost at their cost, not yours. 

You Spent Thirty Years Paying off the Mortgage and You Are about to Retire

Most people spend about thirty years or more paying off their mortgage. It often ends up being double or triple the amount they originally borrowed to buy a home, and that is money you just do not want to lose. When you are also about to retire, you want to be sure that you have a home in which you can retire and relax, and that it will be protected well beyond your lifespan. If you intend to leave the home to one of your heirs, then you definitely want to protect it against harm. Otherwise, you would be leaving your heirs nothing but a burned out shell or a bare lot after debris has been removed. Additionally, without a home, your retirement residence might be someplace you would choose to avoid in your golden years.